Date: Saturday, September 28th, 2019
Vietnam’s campaign to tamp down the Trump administration’s trade gap ire has come to a coastal commune better known for growing dragon fruit along one-lane potholed roads.
The community could soon be home to a $5 billion liquefied natural gas project that would include an import terminal and gas-fired power plant and eventually import billions of dollars of U.S. fuel into the country. It’s being fast-tracked with the blessing of Prime Minister Nguyen Xuan Phuc as part of a push to buy American products in Vietnam, where the Communist government has embarked on a crash course in modern U.S. politics.
“I’ve never seen the Vietnamese government move so quickly,” said John Rockhold, an engineer with 28 years experience shepherding infrastructure projects in Vietnam. He is country director of Energy Capital Vietnam, which is leading a consortium of companies backing the development on salt beds in southern Binh Thuan province. “I think they see LNG as a way of lowering the trade deficit the U.S. has with Vietnam. There is a lot of pressure from the White House right now.”
Indeed, the nation’s leaders are doing all they can to avoid China’s fate after President Donald Trump in June described Vietnam as “almost the single worst abuser of everybody” when asked if he wanted to impose tariffs on the nation. U.S. Trade Representative Robert Lighthizer “has a scoreboard: if you have a trade surplus with the U.S. of over $10 billion, you are in the middle of his dart board,” said Ernest Bower, president of Fairfax, Virginia-based Bower Group Asia, which advises businesses on operating in Southeast Asia.
Vietnam has become perhaps Asia’s biggest beneficiary of the U.S.-China trade war as companies including Nintendo Co. and Alphabet Inc.’s Google shift production to the country. So Vietnamese officials, from the politburo to local governments, are looking for ways to trim the nation’s trade surplus with the U.S., which hit $40 billion in 2018. That gap totaled $30 billion in the first seven months of this year, 39% higher than in the same period last year, according to U.S. Census Bureau data.
“If we buy more from the U.S., it will surely help boost our relationship with them,” said Mai Anh Tung, a government official in Binh Thuan province, where the LNG project involving companies such as General Electric Co., KBR Inc. and Korea Gas is planned.
Vietnam’s Communist Party Secretary and President Nguyen Phu Trong is expected to visit the White House next month with a deal list for made-in-America products. Think natural gas from Texas, coal from Pennsylvania, pork from Iowa, and even aircraft engines—a shopping cart that could total billions of dollars. It’s no coincidence that many of these products come from regions that are important to Trump’s re-election hopes in 2020.
“They have hired trade advisers,” Bower said. “They’ve learned you have to have a game in Washington.”
This isn’t the first time Trump has pressured Vietnam on trade. The U.S. president prodded Vietnamese leaders to buy U.S. military equipment during his 2017 visit to the country, reminding his hosts that he would face re-election. Vietnam, which until 2016 was barred from buying U.S. military weapons systems, has received training from the U.S. on navigating America’s procurement process, said Tuong Vu, a professor of political science at the University of Oregon.
Vietnam’s one-party government can influence decisions of private companies, state-owned enterprises and local authorities, such as those overseeing the LNG project in Binh Thuan province, 212 kilometers (132 miles) northeast of Ho Chi Minh City. The project will buy U.S. LNG, though discussions with suppliers haven’t begun yet, Rockhold said.
“If private companies support the policies of the government, the government can support the private companies in other ways,” said Le Dang Doanh, a Hanoi-based economist and former government adviser. “All the tycoons in Vietnam are well-connected with the leadership of the government.”
In fact, Phuc hasn’t been shy about his U.S. shopping spree. He made a beeline for the U.S. president at the Group of 20 summit in Japan for an impromptu huddle, promising to buy “large volumes” of LNG. The country’s total LNG demand is estimated to reach 4 million tons a year by 2030, according to BloombergNEF analysts. Importing all of that fuel from the U.S.—valued at about $1.5 billion a year—would equal 3.7% of the country’s 2018 trade surplus with America.
This month Liquefied Natural Gas Ltd. announced a non-binding term sheet that could lead to the first deal to supply U.S. gas to Vietnam for a Mekong Delta power plant. The agreement, which could result in $30 billion of exports from the U.S. over the 25-year project, would “help balance Vietnam’s trade surplus with the U.S.,” Singapore-based Delta Offshore Energy PTE LTD, which plans to build the plant, said in a press release.
Phuc in a January interview promised that his country would buy more Boeing Co. aircraft. A month later, during Trump’s visit to Hanoi to meet with North Korean leader Kim Jong-Un, Vietnam’s Bamboo Airways and VietJet Aviation JSC signed agreements to purchase 110 Boeing jets. State-owned Vietnam Airlines JSC says it is considering an order for 50-100 737 Max.
“Doing business with U.S. partners is safe and it can help develop the relationship between Vietnam and the U.S.,” Bamboo Airways Chairman Trinh Van Quyet said.
In August, state-run Vietnam National Coal-Mineral Industries announced it was negotiating to buy U.S. coal for the first time from Xcoal Energy & Resources LLC, which is based in Pennsylvania, a state expected to play a pivotal role in the 2020 election and which Trump won in 2016.
Meanwhile, Nestor Scherbey, a licensed U.S. customs broker and consultant based in Ho Chi Minh City, is working with U.S. meat suppliers to help fill an estimated 500,000-ton pork shortage—valued at $1.29 billion—expected between now and the Tet Lunar New Year amid a swine fever epidemic that has reduced Vietnam’s hog population.
“You’ll start seeing things like packaged ham shipped from Texas in Vietnam supermarkets,” he said.
Vietnamese consumers already favor American products. The nation imported more than $3.1 billion in U.S. electronics, such as iPhones and Dell Technologies Inc. laptops, in the first eight months of the year, a 52% increase from last year, according to government statistics. U.S. vegetable and fruit imports have soared 72% as Washington Gala apples and Thompson seedless grapes are showing up in supermarket checkout lines.
Still, with an average annual per capita income of 58.5 million dong ($2,522), boosting other pricey imports isn’t a given. Alaskan lobster, which sells for the equivalent of $56 per kilogram in Ho Chi Minh City, and Ford Motor Co.’s Explorer sport utility vehicle, with a price tag of about $97,700 in Vietnam, are out of reach for most Vietnamese consumers.
Vietnam’s efforts to boost imports from the U.S. faces another complication: Trump’s decision to exit the 12-nation transpacific trade deal. The pact will eventually slash 90% of tariffs from nations such as Australia, New Zealand, Japan and Canada—putting U.S. exports at a disadvantage, said Fred Burke, managing partner at the law firm Baker McKenzie.
“Many of the most significant tariff reductions will begin taking effect in the run-up to the presidential election in the U.S.,” he said.
Click here to read the entire article from its original source